When you enter an online world or game, you have to click a little box or button and agree to a set of terms, usually called the “Terms of Service” (TOS) or the “End User License Agreement” (EULA).

Although this kind of agreement (technically, a “contract of adhesion“) can form a binding contract, courts scrutinize the terms of contracts like this carefully because the user does not get to negotiate the terms; he or she is offered them on a “take it or leave it” basis.

This series, “Click to Agree,” will also scrutinize these terms, focusing on seven of the most popular virtual worlds and games. Today’s article focuses on the terms that how to settle disputes with a provider.

The first part of today’s article is about “choice of law” and “choice of forum” clauses. The terms sound similar, but have different meanings.

“Choice of Law” and “Choice of Forum” Clauses

“Choice of Law” provisions tell users which state or country’s law will be applied if there is a dispute about the contract. For example, if you have a conflict with Mindark over the contract you must agree to in order to play Entropia Universe, the laws of Sweden are applied. If you have a disagreement with Blizzard over World of Warcraft, it is covered by the laws of the state of Delaware.

On the other hand, “Choice of Forum” refers to the geographic location of the court where the complaint must be filed, and where the arbitration or trial will be held to decide any dispute (examples: San Francisco County for IMVU, and California, generally, for There.com). Theoretically, any location could be selected, but courts typically find these choices must, at the very least, meet a “reasonableness test” — the choice must be tied to the parties’ convenience.

A breakdown of these clauses in seven popular worlds and games follows.

Online World

Choice of Law

Choice of Forum

IMVU

State of California

San Francisco County

Second Life

State of California

San Francisco County for all matters over $10k. Binding Non-Appearance Arbitration (Phone, Teleconference, Avatar) for Matters Under $10k.

Arbitration required – either “on-line before the Active Worlds Tribunal” or before a panel of the American Arbitration Association Boston, Massachusetts.

Entropia Universe

Sweden

Sweden

World of Warcraft

State of Delaware

Arbitration required except for IP cases, computer crime, and claims for injunctive relieve. Arbitration to be initiated in Los Angeles, California (for international players), or at “any location convenient to you” (for U.S. players). All non-arbitration claims to be filed in Los Angeles, California.

Choice of Law clauses say what law is applied to disputes. Online worlds are generally hosted at a central location and serve a widespread user base. Although no case has tested a Choice of Law provision of a virtual world or game yet, courts have generally upheld provisions where similarly positioned companies (AOL, Dell, Gateway, etc.) imposed Choice of Law provisions choosing the law of their state of incorporation or headquarters.

Consumers should understand that when a Choice of Law provision is included in the TOS or EULA, any dispute will likely be governed by that provision.

“Choice of Forum” clauses are different — they say where the lawsuit (or arbitration) must be filed. Many people have challenged these clauses, and the results are mixed. Some courts have allowed companies with central distribution of products to a world-wide consumer base to require lawsuits to be filed near their home bases, but some cases have also gone the other way. At minimum, consumers should understand that when it is made explicit in the TOS or EULA, a company will likely move to dismiss any case filed in another jurisdiction. In other words, consider filing, as the saying goes, “where the lawyers are.”

In a Choice of Forum clause, the forum must be “reasonable.” The Restatement of Laws lists many indicators of “reasonableness,” but the main thrust of these is fairness to the consumer and a “reasonable relation” to the corporate presence — and not merely picking “favorable” jurisdictions.

Many of the cases against AOL, Dell, etc., involve class-action matters. Lawsuits against virtual world and game providers could follow this model, as individual damages might be insignificant, but a class could demand millions of dollars in the aggregate. For example, Second life statistics show 930,00 logins last month) and a class action certified as to only 5% of those residents for $100 each would generate nearly $5 million in damages.

Arbitration Clauses

Arbitration is a method of deciding claims by bypassing a courtroom, and instead using an arbitrator (who is specially trained in judging legal cases). The American Arbitration Association is one organization that conducts arbitrations. Companies will often include arbitration clauses in TOS and EULAs to make their own legal costs lower and more predictable, and also to make a class-action suit less likely (as class-action suits are more expensive to defend).

Each of the worlds and games we are examining handles arbitration differently. Some (Entropia Universe, There.com, and others) have no arbitration provision at all. Second Life allows non-appearance arbitration for matters under $10,000. This non-appearance arbitration is to be conducted by telephone, online, or via written submissions, giving rise to the novel possibility of avatar-based arbitration. Active Worlds requires arbitration, and that arbitration an also take place in the virtual world, or, optionally, in Boston. World of Warcraft requires arbitration as well, but does not provide for any in-world or non-appearance arbitration; instead, arbitration can be initiated at “any location convenient to you” for U.S. players. It is noteworthy that World of Warcraft is the only world that leaves any choice of venue up to the consumer, though international World of Warcraft players must file arbitration claims in Los Angeles, California.

Notably, Second Life’s arbitration clause recently changed. The previous version was declared unconscionable (.pdf) on the grounds that there was no mutuality. The provider could ban an account at will, but the user had to go through an expensive arbitration with a three-arbitrator panel for redress.

State law generally controls whether arbitration provisions are enforceable, but state laws that are particularly hostile to arbitration agreements are preempted by the Federal Arbitration Act. The burden of proof, in every case viewed by this commentator, fell on the party wishing to avoid arbitration.

Application

Obviously, where and how users get to decide disputes varies dramatically by provider. Mindark, for example, sets both choice of law and choice of forum for Entropia Universe disputes Sweden.

Wait, Sweden? You mean I have to go to Sweden? Sure, Entropia has its choice of law as Sweden, but have to go there to litigate? And from the other perspective, are European users really expected to trek to Los Angeles to arbitrate against Blizzard?

Consumers could argue that these provisions are not reasonable. For example, a U.S. user could argue that even if Swedish law should apply to an Entropia dispute, the forum should be a U.S. court applying Swedish law (not unprecedented), the same would presumably be true for an European World of Warcraft player.

Lastly, consider the companies themselves behind these worlds when evaluating their terms. Electronic Arts (The Sims Online) is the world’s leading publisher of video games, and The Sims Online is just one of several online properties EA has (have you ever heard of Madden?) So EA has a interest in making their Terms of Service applicable to all their online games.

Did I say lastly? I lied. An idea that could take up an essay in itself is in-world arbitration (now available in Second Life and Active Worlds). Your avatar could “Defend Your (virtual) Life” (with apologies to Albert Brooks). Of course, your counsel could be real, and represented by an avatar.

Jay Moffitt is a Tennessee attorney of two decades experience, obsessively interested in copyright law. (Tennessee is among the top three most litigious states for copyright and trademark law; thank you Elvis Presley Enterprises and country music!) He has worked as a software negotiator for a Fortune 50 company, been certified by Microsoft as an A+ certified computer technician, and built and maintained a classic films website frequented by visitors from over 50 countries.

Guest Commentary on VB solely reflects the opinion of the author, and not necessarily the opinion of VB’s editor, other VB writers, or VB’s sponsors.

First and foremost,
Great post, very insightful. It certainly assists lawyers in starting to think about how to challenge a case prior to discussing it.

The matter of Avatar based arbitration may be Interesting as an article by itself.

The thing is, that both forum and choice of law are examined by the court you filed your claim at. Meaning that if I, as an Israeli Citizen, chose to file proceedings against Blizzard here, Blizzard will have to come here, and challenge the my claim for Lex Loci Delicti and Lex Fori prior to granting it an injunctive relief and requesting me to state my claim in Delaware.

The Israeli courts take adhesive contracts’ request for Arbitration and for Forums as problematic and tend to avoid enforcing them.

But this doesn’t apply only in Israel. Think of what will happen in Germany, where its contracts of adhesion law (and copyright) is harsher than in the US. would the choice of forum apply there? I’m not sure.

And I don’t want to know what will happen when a Chinese will challenge this clause in a China court…

Willl there be further analysis in these articles of the survivability of a TOS in light of their implicit attempts to avoid class action suits?

Also, what success can an in-game arbitration have without enforceability, or is the only method of enforceability to be seen to be of one of banning or suspension? If the game developer is not a party to the in-game arbitration, but instead intends to ignore it, then what practical purpose does / can it serve? And lastly, without some objective memorialization of the issues presented at the arbitration, and the rules applied, how can a community trust that the in-game arbiter’s decision was just?

Even a RL arbitration provides only the game developer with positive benefits; again one of secrecy. Arbitrations do not lead to or provide the involuntarily committed community with the ability to truly understand the issues, know what the decision maker standards or rules to be applied to the issues are to be, or develop a historical and comprehensive set of decisions for the community to review so it can understand as a community just what the “community” may be.

Regarding the SL new arbitration provision, can it withstand a legal challenge in a class action lawsuit setting? For example, there have recently been numerous comments by EC players re: SL’s new VAT policy. I don’t know EC law; however, the posters strongly suggest there is some notice / posting requirement in connection with assessing a VAT tax. In SL’s case, could the EC players at large file a class-action suit applying California law and invalidate the SL arbitration provision because it does not provide for class actions, but at first blush, seems instead to preclude it?

For example, once a user clicks the “I Agree” button, and then proceeds “to play”, whay cannot a user send an email to the company stating that “In consideration of my continued participation in [name of game], we both agree that the TOS agreed to on [date] has been modified as follows [modification terms].”

Would not the user’s continued participation, for example in SL, provide legal consideration for the modificaiton as their “commodity” seems to be the number of registered users that frequent and return thereby giving them presence and value in their marketplace. Perhaps that same consideration is applicable across games.

Mutual assent, that is the company’s acceptance of the user’s modified terms, would seem to occur by the company’s receipt of the modification and then continuing to allow the user to gain access thereby accepting the user’s contribution to the success of the game (i.e., without users, games might exist, but have no commercial value).

I suppose the company would argue that they weren’t aware of the modification because they don’t / can’t read all emails sent them; however, applying the same principles as have been applied to those that click “I agree” without reading the terms but are deemed bound, why wouldn’t the company too be bound by receipt of an email which announces both the modification and confirms it by the user’s actions (accessing the game again). It is at essence, that same quantum of communication and conduct that courts have repeatedly upheld in favor of the company in determining whether there has been assent by the user that simply clicks “I agree”.

In games where the TOS is periodically modified and for a paying user that already owns assets in the game, to get to those assets, the user must again click I agree…. well, that doesn’t strike anyone as legally equitable. Especially for this class of users, seems the law would have to carve out an exception (which eventually may swallow the rule) providing that for such a class of users, a modification sent by the user to the company would be legally binding on the company, especially whether it affected affected that user’s previously owned assets.

Really enjoyed the comments. All the comments reflect that each of you is reading the article thoroughly and at a really deep level. Can’t answer all the questions, specifically, but do want to point out to Comment 4 that it’s a great question and it may be addressed in the series. For Comment 5, generallly a “contract of adhesion” is assumed not to be amendable by the user. The logistics prohibit it, but general law principles say “the contract is weighted against the drafter” because the drafter could have protected themselves if they wished to. Therefore, as pointed out in one of the other comments (#2) the victim/plaintiff will have the advantage of at least attempting to sue in their own court, especially if international. I won’t touch that question.

Finally, the issue of “avoiding class-action by choosing arbitration”. As pointed out to me by Benjamin, the arbitration costs are actually quite high in contracts that require a full three-judge arbitration panel. Let’s just say that arbitration clauses at least make the costs “predictable”. There are many reasons to avoid taking cases directly to court, and in a worldwide game setting choosing a reasonable arbitration method makes it predictable. There might be a peripheral “effect” of reducing class actions, but to this point those cases mainly address CA law and being a TN lawyer would not even hazard a guess.

When I click on one of those ‘agree’ buttons, I am always thinking ‘I do not agree’, but I simply go through this ‘gauntlet’ in order to go or do what I want to do.

But, I think that these TOS ‘agree’ buttons, are sort of like unto
‘WAIVERS’.
But, I always sort of have my own ‘TOS’ that I am thinking of,
and they are sort of my own philosophies.
*For one thing, the service providers usually do not provide me with space, so I can let them know what I think.
*Another thing is, that I think they would not let me use their services sometimes, if I tell them what my thinking is.

But, I usually want to use their services, and yet I do not really want to be bound up by TOS.

And, what if I said ” I will go along somewhat with TOS, but not unto the death, nor unto severe or extreme persecutions and/or tortures’???
Yet, TOS and WAIVERS in various areas do seek to bind men up completely and entirely; even unto tortures and death.
(waivers get used in health care, to release people from accountabilities; where afflicted are coerced into these matters)

At what point in time, can users ‘waive’ the fact that they clicked on the agree button??

And, signing a ‘waiver’ is almost like ‘committing suicide’, but I think it is sort of like being ‘murdered’ or ‘martyred’.
I am not suicidal. Nor do I want to be murdered/martyred.
Rather, I think TOS and waivers come from persons seeking to avoid their own accountabilities to the law.
And, that is unlawful.
If I am not suicidal, and I do not want to be murdered, then I am not Jesus.

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About Virtually Blind

From early 2007 to late 2008, Virtually Blind covered legal news, issues, and events that impact virtual worlds, video games, and the 3D internet. The site is no longer updated, though it remains online as a research resource.

Posts and comments on VB were and are not offered as legal advice, and are not confidential attorney-client communication. Posts and comments reflect only the opinion of the author, and do not necessarily represent the opinion of VB's editor, other contributors, sponsors, or any author's employer.